Nasty sense of betrayal by a grasping bank

For the past five days, First Direct chief executive Chris Pilling has been frantically trying to downplay the furious reaction to his controversial decision to impose monthly banking fees on customers. For all his smooth words, it's a battle he has had little chance of winning.

For better or for worse, most people demand 'free' banking and see little else as fair, especially when the big banks are already trawling in more than £34 billion of bloated profits a year through the charging of unjustifiably high overdraft rates and the selling of expensive payment protection insurance.

Most First Direct customers (of which I am not one) expect better from the bank, which, when it arrived on the scene in 1989, was a breath of fresh air with its dual commitment to fastidious customer service and 24-hour, seven-day-a-week banking. Many now feel betrayed, especially the less well-off.

Though Pilling would have us believe otherwise, there is no doubt he has antagonised a significant chunk of his 1.3 million customer base by introducing a monthly fee of £10 from next February. The fee will be levied on accounts where customers fail to pay in at least £1,500 a month or are unable to maintain a monthly balance of £1,500.

Those who fear they will be unable to attain either goal will be able to escape the fee only by purchasing another financial product from the HSBC-owned bank.

But not all First Direct products will 'qualify'. The taking out of a personal loan or a credit card - expensive products with high profit margins - will prevent monthly charges, but cheaper products --such as annual travel insurance, life insurance or pet insurance - will not.

A wave of protest has flooded into our sister website, thisismoney. The response, according to site editor Andrew Oxlade, has been bigger than for any other personal finance issue since Standard Life last year announced details of its demutualisation windfalls.

First Direct customers have also been contacting Financial Mail in high numbers. Many, such as 42-year-old Alex Tite and his partner Lyn White, 52, from Eastbourne, East Sussex, have moved their business elsewhere.

In Alex and Lyn's case, they have transferred their joint bank account to Halifax, which provides them with free banking despite their modest monthly income of £900.

'Being asked to pay £120 in annual bank charges was the final straw,' says Alex. 'Over the years, we've put up with unfair charges imposed by a whole number of financial and utility companies without a moan or a grumble. But enough is enough.

'In the recent past, First Direct has charged us £75 for exceeding our overdraft for two days while a cheque cleared. It also hit us with a £25 fee when we increased our overdraft. Another £120 of charges is too much to swallow.'

On Friday, Pilling told Financial Mail that the charges, which up to 195,000 customers could face, are necessary to keep First Direct ahead of the pack. The revenue will be used to continue to invest in cutting-edge banking services to be available via mobile phones. 'This is the future,' Pilling said. 'It's what people want.'

Such a defence is of little comfort to those, such as Alex Tite, who were encouraged to join First Direct on the understanding that they would enjoy free banking, only to be told now that they will not. Find out more at thisismoney.co.uk/freebanking

One group of lowly paid people who will be able to escape First Direct's new charges are its employees. The bank has more than 3,000 call centre staff in Leeds and Glasgow and most of them earn less than the £1,500 a month required to keep accounts fee-free.

Yet Pilling confirmed that all of his employees will be immune from the new monthly charges. One rule for them and one rule for the rest.